Top Portfolio Products: BlackRock to Cut ETF Fees

New products introduced over the last week include a series of geographic exposure indexes from Russell, a strategic dividend income fund from Advantus and an ETF from AdvisorShares.

By Marlene Y. Satter|September 14, 2012 at 10:54 AM

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New products introduced over the last week include a series of geographic exposure indexes from Russell, a strategic dividend income fund from Advantus and an ETF from AdvisorShares.

In addition, BlackRock announced that it would cut fees on some of its large, liquid ETFs, and Market Vectors lowered the expense cap on one of its ETFs.

Here are the latest developments of interest to advisors:

1) BlackRock to Cut ETF Fees

After a research note issued Sept. 5 by Sanford Bernstein & Co. that said BlackRock would need to cut fees on some of its products, Bloomberg reported that the firm is doing just that, dropping fees on large ETFs after Vanguard Group outpaced BlackRock in market share.

While State Street Global Advisors said in a report that BlackRock still leads with 41% of the U.S. ETF business, that’s down 1.6% so far this year through July, while Vanguard gained 1.8% to reach 18% market share. BlackRock’s fees on some of its large and liquid iShares products are double, or even more than double, Vanguard’s fees on corresponding products, and it’s showing in the marketplace. Fee cuts are BlackRock’s response. Smaller, less liquid funds are under less pressure to drop fees.

EMLC seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the J.P. Morgan GBI-EMG Core Index (GBIEMCOR), a rules-based, market capitalization-weighted index that is designed to be investible and includes only those countries that are accessible by most of the international investor base.

3) Russell Introduces Geographic Exposure Indexes

Russell Investments introduced on Wednesday the Russell Geographic Exposure (“GeoExposure”) Index Series, four new indexes developed from existing Russell Global Indexes, that follow a rules-based methodology to identify companies with exposure to emerging markets; they then adjust the weight for each company within the index to reflect exposure significance.

The series initially consists of the Russell 1000 Emerging Markets GeoExposure Index; the Russell Developed Large Cap Emerging Markets GeoExposure Index; the Russell Developed Europe Large Cap Emerging Markets GeoExposure Index; and the Russell Developed ex-North America Large Cap Emerging Markets GeoExposure Index.

VSDIX’s primary investment strategy is to invest in dividend-paying equity securities including common and preferred stocks from utilities, energy, infrastructure-related, real estate-related and other companies. Typically, 50% or more of its total assets will be allocated to real estate securities. It may also invest up to 25% of its total assets in the securities of master limited partnerships (MLPs). In addition, it may invest in ETFs, ETNs, Treasury inflation-protected securities (TIPS) and futures, and may also write covered calls as it seeks to manage inflation or volatility, increase income or gain market exposure.

AdvisorShares announced Thursday that the STAR Global Buy-Write ETF will open for trading on Tuesday. VEGA is subadvised by Partnervest Advisory Services and seeks consistent repeatable returns across all market cycles by using a proprietary strategy known as Volatility Enhanced Global Appreciation (VEGA). Partnervest employs a“buy-write” or “covered call” overlay for VEGA’s global allocation strategy using exchange-traded products (ETPs).

The strategy simultaneously writes (sells) an option against each position in order to seek cumulative price appreciation from the portfolio’s global exposure, while generating a consistent income stream from the sale of covered call and/or cash-secured put options, creating less dependence on markets for returns during downturns. When volatility is low the portfolio manager uses protective put options to manage downside risk.

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